ESPN plans to pursue broadcast rights to the upcoming Olympic Games, a move that, if successful, will be an advertising revenue goldmine as well as push up the amount the network can charge affiliates for content.
ESPN already leads everyone else in monthly carriage fees--$4.50 per month per subscriber, SNL Kagan says--and must look to new, top-of-the-line, exclusive content in order to grow them any further at the moment.
"Between now and when the Olympics rights that are being bid out occur, ESPN has a number of rather large negotiations with distributors to engage in," , Disney CEO Bob Iger told analysts during a Q2 earnings call. "There are definitely opportunities for ESPN to address its subscription revenue based on the general programming offering that it has which is both a collection of events including the Pac 12 or sports it's already bought and possibly sports that it may buy. I think it would be wrong to assume that the purchase of an Olympics should only be looked at as a possible generator of incremental advertising revenue. It would definitely generate incremental subscription revenue."
Obviously, ESPN isn't the only one interested in the Olympics juggernaut. But it does plan to show live games around the clock, any time they occur, which is a differentiator vis a vis competition like FOX and NBC, which has other programming to accomodate.
NBC has outbid ESPN before, specifically for the 2010 Winter Games in Vancouver and the 2012 Summer Games in London. It agreed to pay $2.2 billion for the package of the two, and lost roughly $200 million on the Vancouver Games, so it will look to London to bolster the economics of the deal. Iger said thaht ESPN will not make the same mistake.
"While ESPN certainly intends to take a look at the Olympics seriously, ESPN's also demonstrated a great ability to walk away from opportunities that they didn't believe made sense from a bottom line perspective and they have also demonstrated an ability to divest certain rights that they feel weren't driving the value that other rights could have," Iger said. "It's going to continue to be a balance."
Network execs will descend upon Lausanne, Switzerland on June 6 to make presentations and submit sealed bids for broadcast rights, this time for the 2014 Winter and 2016 Summer Games. They can also bid on a bundle of the next four Games through 2020.